Right-to-Work

"We heard you was loading a ship without the assistance of bona fide union labor. Say it ain't so."
--Mikey (Eraser)

The National Labor Relations Act of 1935, also known as the Wagner Act, stated that a majority of workers can authorize a union to represent them, regardless of an employer's wishes. Wagner also legalized the 'closed shop,' in which employees at unionized workplaces must be members of the union as a condition of employment. Any employees not wishing to join the union still had to pay union dues.

The Taft Hartley Act of 1947 amended Wagner. It outlawed the closed shop, thereby making it illegal for an employer to force an employee to join a union. Taft-Hartley also authorized states to forbid agreements between employers and unions that required employees to pay the equivalent of union dues.

Over time, states have responded by passing 'right-to-work' laws (RTW) that regulate contractual agreements between employers and unions by essentially banning contracts that exclude non-union workers or require non-union workers to pay union dues.

On the surface, this seems to be a step in the direct of free markets by countering ill effects of compulsory unionization. Upon closer examination, however, RTW constitutes a further step away from free markets. RTW is an intervention piled on previous interventions in the market for labor.

In unhampered labor markets, both employers and employees are free to associate with whom they choose. But RTW prohibits employers from associating exclusively with unionized workers although it is their right to do so.

Although unions are often rightly associated with practices that impair free contracting, this does not have to be their primary objective. Rather than seeking monopolistic control of wage rates, unions could develop a brands that employers would want to be associated with. For example, unions could work to develop their members's skill sets so that employers are motivated to reduce their search costs by dealing with union members only--since they know they are hiring quality people.

One of the features of unions that I found particularly attractive during my industry years was their capacity to convey info to and from their membership. This was an attractive communication channel that would have been costly to develop for my company.

Stated differently, there are reasons why an employer an employer might prefer to require union membership. RTW takes freedom to contract in that manner away.

Parenthetically, we should note that the situation differs in the public sphere. Collective bargaining policies between government and public sector employees must be viewed differently because freedom of contract is the right of citizens but not the right of government officials who represent them. An agency problem exists.

The Wagner Act has restricted freedom. RTW further restricts it.